James Keenan, the New York-based head of leveraged finance and high-yield at BlackRock Inc., said that junk-rated corporate borrowers are in “pretty good shape.” Keenan spoke today in an interview with Stephanie Ruhle and Erik Schatzker on Bloomberg Television’s “Market Makers.”
With companies using credit markets to finance debt extensions, there is not that much maturing in the next few years, Keenan said. “It’s hard to see a lot of defaults without a significant recession.”
The global trailing 12-month speculative-grade default rate increased to an estimated 2.7 percent in June, from 2.6 percent a month earlier, according to Standard & Poor’s report. The U.S. economy grew 1.9 percent in the first quarter, according to figures from the Commerce Department.
“We are seeing a global growth slowdown,” Keenan said. “Not just in the United Sates, but in Europe and Latin America, as well.”
The world’s biggest money manager has targeted sectors such as autos, hospitals, natural gas and U.S. chemicals, as well as infrastructure surrounding broadband, Keenan said.
High-yield investors are picking up an extra 7 percentage points of yield relative to Treasuries, said Keenan. “The excess spread you’re getting is pretty significant.”
Speculative-grade debt is rated less than Baa3 by Moody’s Investors Service and below BBB- by Standard & Poor’s.